Avery Dennison Corp. AVY reported adjusted earnings of $1.33 per share in fourth-quarter 2017, up 34% from 99 cents recorded in the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of $1.25.
Including restructuring costs, the company recorded a loss of 66 cents per share in the quarter as against earnings of 69 cents recorded in the prior-year quarter.
Total revenues jumped around 11.9% to $1.74 billion from $1.55 billion recorded in the year-earlier quarter, driven by contributions from acquisitions and organic growth. Moreover, the figure surpassed the Zacks Consensus Estimate of $1.70 billion. On an organic basis, sales were up nearly 4.7% year over year.
Avery Dennison Corporation Price, Consensus and EPS Surprise
Avery Dennison Corporation Price, Consensus and EPS Surprise | Avery Dennison Corporation Quote
Cost of sales in the reported quarter went up 12.8% year over year to $1.27 billion. Gross profit increased around 9.4% to $465.6 million, while gross margin contracted 60 basis points (bps) to 26.8%.
Marketing, general and administrative expenses came in at $286 million compared with $279.8 million incurred in the year-ago quarter. Adjusted operating profit advanced 23% year over year to $179.6 million. Adjusted operating margin expanded 90 bps on a year-over-year basis to 10.3%.
Segmental Performance
Revenues from the Label and Graphic Materials segment climbed 9.2% year over year to $1,162 million. On an organic basis, sales grew around 4.6%. Adjusted operating profit rose 15.9% to $142 million from $122.6 million reported in the comparable period last year.
Revenues from the Retail Branding and Information Solutions segment were up 5.2% to $395.5 million from $375.9 million recorded in the year-earlier quarter. Organic sales growth came in at 4.7%. The segment’s adjusted operating income improved 25% to $46.9 million.
The Industrial and Healthcare Materials segment reported net sales of $178 million, up 60.3% from $111 million recorded in the prior-year quarter. The segment reported adjusted operating income of $13.5 million compared to the operating profit of $10.8 million recorded in the year-ago period.
2017 Performance
Avery Dennison reported adjusted earnings per share of $5.00 in 2017, up 24% from $4.02 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $4.93. Including one-time items, the bottom line came in at $3.13, down 12% from $3.54 recorded in 2016.
Revenues grew 8.7% year over year to $6.6 billion from $6.1 billion recorded in 2016. The figure came in line with the Zacks Consensus Estimate.
Financial Updates
Avery Dennison had cash and cash equivalents of $224 million as of Dec 31, 2017 compared with $195 million recorded as of Dec. 31, 2016. Cash flow from operations came in at $650 million during the fiscal 2017, compared to $585 million recorded last year.
At the end of fiscal 2017, Avery Dennison’s long-term debt increased to $1,316 million compared with $713 million at the end of the fiscal 2016.
In 2017, Avery Dennison repurchased 1.5 million shares for a total cost of $130 million. The company’s share count increased 0.1 million in the reported quarter.
Cost-Reduction Activities
In 2017, Avery Dennison realized approximately $59 million in pre-tax savings from restructuring. The company incurred restructuring charges of approximately $33 million.
Guidance
For 2018, Avery Dennison guided its adjusted earnings per share range of $5.70-$5.95. The company expects to deliver strong top-line and double-digit EPS growth in 2018. The company remains confident about the continued execution of strategies which will help achieve profitable growth and improving returns.
Share Price Performance
Over the past year, Avery Dennison has outperformed its industry with respect to price performance. The stock has rallied 47.3%, while the industry recorded growth of 38.9% during the same time frame.
Zacks Rank & Key Picks
Avery Dennison currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Applied Industrial Technologies, Inc. AIT, H&E Equipment Services, Inc. HEES and Disco Corp. DSCSY. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has a long-term earnings growth rate of 12%. Its shares have appreciated 31.9%, over the past six months.
H&E Equipment Services has a long-term earnings growth rate of 18.6%. The company’s shares have rallied 78.4% during the same time frame.
Disco Corp. has a long-term earnings growth rate of 20%. The stock has gained 34.1% in six months’ time.
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